Bangalore: India’s sixth largest software services firm, Tech Mahindra Ltd, said it has won an anticipated $700 million or Rs2,959 crore technology outsourcing deal from a key stakeholder BT Group Plc., taking its total orders from the British telecom firm to more than $2 billion or Rs8,500 crore.
Two months ago, the Indian software firm paid BT Rs440 crore in the quarter ended March as a so-called “exclusivity payment”. The company posted a loss of Rs221 crore in the quarter on account of this. While announcing these details in May, the company had not identified BT and instead said the payment was to a large client over an impending order. “We are giving some savings upfront to the client, and will give more going forward. We look at it as an acquisition, not a loss,” the company’s vice-chairman Vineet Nayyar had then told Reuters.
Earlier in May, Tech Mahindra denied that it had won any such order from BT.
“It is a good deal. In times of difficult business environment, there is revenue visibility even if it is from one customer,” said Harith Shah, equity analyst with Angel Broking Ltd, a Mumbai based brokerage. Tech Mahindra will assist BT in its transition to improve customer experience and cycle time, the firm said in a statement. “Our strategy of long-term deals is proving right. We have more than five contracts that are of five-seven years (duration),” said Sanjay Kalra, President of Tech Mahindra.
BT, formerly British Telecom, owns 31% share in Tech Mahindra and accounts for 61% of revenue of the firm.
The May payment wasn’t the first such “upfront savings” paid by Tech Mahindra. In December 2006, it had made an upfront payment of Rs525 crore to BT, in a $1 billion (Rs4,227 crore today) deal.
“Our revenue predictibility is good,” said Kalra, on the dependance for larger share of revenue from its biggest customer. While Tech Mahindra is increasing business from BT, its larger rival and Infosys Technologies Ltd saw revenue from BT, also its largest customer, drop from over 10% of its revenue to 7.9%.
On Monday, Tech Mahindra said its net profit for the April-June quarter rose 52% to Rs258.5 crore on increased orders from clients. Revenue for the quarter rose 29% to Rs1,116.4 crore. The firm had reported a net profit of Rs170.3 crore on sales of Rs876.3 crore in the corresponding quarter last year. It increased its workforce by 415 professionals to 24,369 in?the?quarter.